Pay for Today (and Tomorrow): Compensation in the Nonprofit Sector (DC)

Pay for Today (and Tomorrow): Compensation in the Nonprofit Sector 2010 Nonprofit Human Resources Conference October 4, 2010 Joe Brown sloperesources.com

Founded Slope Resources in 1998
Human resources and organization management consulting services for nonprofits
Compensation and performance management
“ Big firm” background
Blog: Done by People
Who am I?

Budget size?
< $10 million
$10 - $20 million
$20 - $50 million
> $50 million
Staff size?
< 10 employees
10 – 50 employees
50 – 100 employees
> 100 employees
Who are you? ?

Human resources responsibility?
Geography?
DC / Virginia / Maryland
New York / Boston / Northeast
Midwest
South
West
Who are you? ?

A bit of philosophy… “ This is not charity. This is business. Business with a social objective…” --Muhammad Yunus

… leads to three principles
Market
Equity
Performance

Executive pay…

… versus employee pay

Where have we been?
Where are we now?
What’s next?
What to do?
Questions and discussion
This afternoon…

Where we have been?

Where we have been?
Nonprofit compensation has traditionally lagged behind for-profit sector
But difference varies by level

Where we have been?
Nonprofit compensation has traditionally lagged behind for-profit sector
Difference also varies by function
Market comes into play
“ Nonprofit” jobs versus “regular” jobs
e.g. development, program vs. IT, finance
Differences even within “nonprofit” jobs
e.g. direct service vs. program development

Where we have been?
Year-to-year salary increases have generally tracked for-profit practices
“ Four percent world”
But, increases have tended to be more homogenous
Across-the-board, COLA
Rather than performance-based
Entitlement mentality

Where we have been?
S l o w shift to performance-based (“merit”) pay
Pay levels, increases, staffing levels, even job titles often limited by grant budgets, etc.

Where we have been?
Bonuses Incentive compensation
Prevalent but limited
For many organizations, not the answer
Perception, complexity, ROI
Instead…
Get the basics right!

Where are we now?

Where are we now? “ It’s the economy, stupid.” --Bill Clinton, 1992

Well-documented (and experienced) impacts
Decreased funding from all sources
Closures
Layoffs, furloughs, salary freezes, salary cuts
Where are we now?

Well-documented (and experienced) impacts
Decreased funding from all sources
Closures
Layoffs, furloughs, salary freezes, salary cuts
Where are we now? ? How many of your organizations have not experienced any of these impacts on compensation in last three years?

All compensation growth limited
Now a “zero to two or three percent world”
More difficult to offer “rich” benefits
Greater differences in demand within nonprofit sector
e.g., development vs. program
Where are we now?

Greater access to general market talent
e.g., IT positions
Caveat emptor!
Increased demand for performance and accountability
Funders, public
Emphasis on evaluation and measurement
Has to translate to employee performance!
Where are we now?

What’s next?

Increasing need to compete for talent
Most bang for the buck
Labor shortage (!)
New sectors
e.g., social enterprise, B-corporations
What’s next?

Generational forces
Demand for competitive – or at least living – wages
Shifting benefit needs/desires
What’s next?

Public, government, and funder scrutiny
May spread to non-executive levels
What’s next?

Public, government, and funder scrutiny
May spread to non-executive levels
Increased compression
Also, focus on low end
Increasing professionalization of nonprofit sector
What’s next?

Increased recognition of the need for broader organizational support
“ Administrative”, “overhead”, “indirect costs” and organization development
GAO report recognized differences in federal grants
Growing recognition and support in philanthropic community
What’s next?

What’s next? ? What other trends impacting compensation are your organizations experiencing or anticipating?

What to do?

There is a silver lining to the times:
“ Pause” in the compensation market
Limited expectations
What to do?

Assess your organization’s current compensation practices
Do you have comprehensive formalized compensation structures and policies?
Assess internal equity – the relationship between job size and current compensation
What to do?

Assess your organization’s current compensation practices
Assess market competitiveness
What market(s)?
Benchmark data
Understand what is important to employees
Targeted research or component of broader culture/opinion assessment
What to do?

Develop a compensation philosophy
What do we pay for?
What market(s) are important to compete with?
At what level?
Are there differences by function or level that we will reflect in our policies and practices?
How will we assess and manage compensation over time?
What to do?

Enhance linkage between compensation and performance
Ensure comprehensive performance management program is in place
Pitfalls:
Focus only on evaluation, not management
Measuring the wrong things
Unclear/diluted/nonexistent relationship between compensation and performance management programs
What to do?

Enhance linkage between compensation and performance
Measure skills, competencies, results, goal achievement
Break entitlement mentality if it exists
Help employees understand and accept compensation and performance realities
What to do?

Use compensation program to inform funding requests
Look beyond the paycheck
Assess currency, competitiveness, and value of traditional benefits
Explore low-cost/no-cost options
Recognition
Flexibility of time and place
Lifestyle perks
What to do?

What to do? ? How else can organizations respond to today’s environment and emerging trends impacting compensation?

Questions and discussion

Joe Brown [email_address] 908 241-8592 sloperesources.com twitter.com/joe_brown Thank you!

Pay for Today (and Tomorrow): Compensation in the Nonprofit Sector (DC)

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